Telstra dividend cut as profit falls 5% in first half

Source Telstra

Source Telstra

The move steered the telco away from its historical practice of paying nearly all profits in dividends, to paying 70 to 90 per cent - a ratio it says is "more in line with global peers and local large companies".

Telstra's profits have been dragged down by its disastrous investment in Ooyala, the US-based business it thought would become a global platform to stream content to websites and smartphones.

Revenue was flat but the company added mobile subscribers.

Capital expenditure is expected at AUD 4.4-4.8 billion in the full year or 18 percent of sales, after spending AUD 2.3 billion in the first half.

Revenue was flat at $12.9 billion, just 0.8% higher.

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The telco has reaffirmed its expectations of a 22 cent full-year dividend and retained its full-year earnings guidance of between $10.1 billion and $10.6 billion, due to one-off gains from the NBN.

The move steered Telstra away from its historical practice of paying nearly all profits in dividends, to paying 70 to 90 per cent - a ratio it says is "more in line with global peers and local large companies". This latest impairment effectively writes down Telstra's investment of about $500 million to zero.

As a result, Telstra has cut its interim dividend to 11 cents (fully franked) - a notable 15.5 cents less than it was a year ago.

Telstra CEO Andrew Penn says it was operating within a significant period of change, including migration to the NBN, competitive challenges, accelerating the pace of technological change and preparation for the transition to 5G.

The interim dividend, to be paid on 29 March 2018 will distribute $1.3 billion to shareholders. We have a deeper sense of great urgency and we're stepping up against competition.

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"We have upgraded our core backbone infrastructure in Australia to enable support of a five-times increase in capacity to meet future customer demand and improved resilience", Penn said.

I'm pleased to say that our results for the first half of FY18 are in line with guidance.

"This is critical against the background of the acceleration in the rollout of the nbn, which is having a material economic impact on Telstra". Penn said that Telstra has so far absorbed $870 million of the negative impact, including $370 million in the last six months.

The number of subscribers increased by 235,000 in the half, bringing the total number to 17.6 million, thanks to the release of Apple's iPhone X which helped drive 130,000 new customer mobile plans.

Telstra added 454,000 nbn connections, maintaining a 51% market share, excluding satellite.

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